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Jacobs v. Great Pacific Century Corp.

Decided: October 15, 1985.

SAMUEL A. JACOBS, INDIVIDUALLY AND ON BEHALF OF ALL THOSE SIMILARLY SITUATED, PLAINTIFFS-RESPONDENTS AND CROSS-APPELLANTS,
v.
GREAT PACIFIC CENTURY CORPORATION, DEFENDANT-APPELLANT AND CROSS-RESPONDENT



On appeal from Superior Court of New Jersey, Law Division, Bergen County, whose opinion is reported at 197 N.J. Super.. 378.

Fritz, Brody and Gaynor. The opinion of the court was delivered by Brody, J.A.D.

Brody

[204 NJSuper Page 606] Plaintiff and other members of the class he represents purchased from defendant (seller) stock in a corporation that owns Century Tower, a cooperative apartment building in Fort Lee. Each purchaser also entered into a proprietary lease of one of the apartments. The sales closed leaving unresolved the single question raised in this litigation: whether by the terms of their written agreement the seller or the purchasers are entitled to

the interest the "down payment" earned before closing. The agreement contains no express provision on the point.

In an opinion reported at 197 N.J. Super. 378, the Law Division judge held that the purchasers are entitled to the interest because the sale of these cooperative apartments is regulated by New York and New Jersey statutes that both provide, "[D]eposits . . . shall continue to be the money of the person making such . . . deposit. . . ." The judge accordingly entered judgment in favor of the purchasers in the amount of $38,514.44 from which $16,420.80 was awarded for attorneys' fees. See R. 4:42-9(a)(2); Sarner v. Sarner, 38 N.J. 463, 467-469 (1962). The trial judge denied the purchasers' further demands for triple damages under the Consumer Fraud Act, N.J.S.A. 56:8-19, and prejudgment interest. Both sides appeal. We affirm the judgment, but arrive at the result on the interest issue a different way.

Each purchaser paid the seller 10% of the purchase price as a "down payment" under the terms of the agreement. The agreement, however, provides the following with respect to that sum:

All monies received by the Seller on account of the Purchase Price shall be deposited in trust in an interest bearing bank account at Citibank, N.A., under the name "One Century City Special Account", until actually transferred to the Seller in connection with the closing under this Purchase Agreement. . . . Until such deposit has been made, the Seller shall hold all monies received by its employees or agents in trust.

The agreement also provides that "[a]ll monies paid by purchasers . . . will be held in trust . . . as required by Sections 352(e)(2) and 352(h) of the General Business Law of the State of New York. . . ."

N.Y.Gen.Bus.Law ยง 352-h and N.J.S.A. 49:3-40 provide in part:

Whenever hereafter any person, offers or sells real estate securities to the public in or from the State of New York [N.J.S.A. 49:3-40 reads "State of New Jersey"], then all moneys received in connection therewith, including deposits or advances therefor, shall continue to be the money of the person making such purchase, deposit or advance, and shall be held in trust by the person offering or selling such real estate securities and shall not be commingled with the

personal moneys or become an asset of the person, receiving the same, and said funds shall remain in trust until actually employed in connection with the consummation of the transaction; . . . .

The trial judge applied the statutes and held that the purchasers are entitled to the interest because under both statutes "deposits . . . shall continue to be the money of the person making such . . . deposit. . . ." The judge rejected the seller's argument that the Legislatures intended the statutes to apply only to the sale of real estate securities for investment and not, as here, the sale of securities incidental to ownership and occupancy of a residential apartment in a cooperative. We need not decide the point because apart from ...


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